Net profit increased 78% in 2022: BOE Precision is BOE's only vehicle display module and system operation platform, providing customers with in-vehicle display assemblies and smart in-vehicle display systems. The company's revenue in 2022 was HK$10.7 billion, an increase of 39%; net profit was HK$583 million, an increase of 78%. The company's TFT module business and touch display module business accounted for 89% of revenue, mainly benefiting from the launch of mass production TFT and touch screen display module projects, the increase in overall automotive demand, and the increase in the proportion of high-end products. According to Omidia data, in the third quarter of 2022, the company ranked first in the world in terms of vehicle screen shipment area, with a market share of 18.6%; among those over 8 inches, large size shipments ranked first, with a global market share of 22.7%.

Covering mainstream NEV customers, overseas market potential is huge: The company's vehicle display products currently cover different fields of different sizes and are used in automotive instruments, central control assemblies, entertainment display systems, rearview mirrors, AR HUDs, etc., and has launched various technical products such as OLED, LTPS, BD Cell, Mini-LED, 3D, large size, multi-screen, curved, and fully laminated, covering most mainstream domestic vehicle companies. Overseas revenue accounted for about 30% in 2022, and the target overseas brand projects in 2022 achieved a 40-fold increase compared to 2021. As overseas sales continue to advance, long-term overseas revenue is expected to reach 50%. Omidia predicts a compound annual growth rate of about 6% in global vehicle display shipments over the next three years. Judging from the global competition pattern, we expect there is still room for BOE FinTech's market share to increase further, and the revenue growth rate is higher than the industry level.

The Chengdu plant was put into operation ahead of schedule: In August last year, the company acquired TFT and touch screen display modules attached to the main stock Tokyo Oriental (000725.SZ) - the remaining 40% of Chengdu BOE's shares to be wholly owned. With a total investment of 2.5 billion yuan, the Chengdu plant entered the first phase of production ahead of schedule at the end of October 2020. The production portion was profitable that year. It is estimated that design production capacity can be achieved in 2023, reaching 15 million vehicle displays per year after delivery. The Chengdu plant is conducive to improving the company's production efficiency and expanding new customers.

Target price: HK$21, purchase rating: We forecast the company's revenue for 2023-2025 to be HK$12.5 billion, HK$15 billion, and HK$17.9 billion, respectively, and net profit attributable to the parent company of HK$670 million, HK$81 billion, and HK$1 billion respectively. The company was given a target price of HK$21, corresponding to 25 times the PE valuation in 2023, with room for a 56% increase from the current price, giving it a purchase rating.